No More Books Corporation has an agreement with Floyd Bank whereby the bank handles $3.6 million in collections a day and requires a $280,000 compensating balance. No More Books is contemplating canceling the agreement and dividing its eastern region so that two other banks will handle its business. Banks A and B will each handle $1.8 million of collections a day, and each requires a compensating balance of $130,000. No More BooksÃƒ¢Ã‚€Ã‚™ financial management expects that collections will be accelerated by one day if the eastern region is divided.
What is the NPV of accepting the system?
Ã‚ Ã‚ NPV $Ã‚ Ã‚ Ã‚
What will be the annual net savings? Assume that the T-bill rate is 2.4 percent annually.
Ã‚ Ã‚ Annual net savings $Ã‚ Ã‚ Ã‚
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